private aid and the financing of development
TRANSCRIPT
Private Aid and the Financing of Development
Raj M. DesaiGeorgetown University and
The Brookings Institution
Development Day, Stockholm, May 11, 2015
Private Development Assistance (PDA)
• Undertaken by private actors (foundations, corporations, voluntary and non-profit organizations)
• Is focused on promotion of economic development and humanitarian needs
• Provided at concessional financial terms where commodities and loans are concerned
Some Numbers
• In FY 2014 World Bank committed $40.8 billion ($32.8 billion disbursed)
• 2014 $45 – $60 billion in total global private aid disbursed (depending on estimate)
• If the EU “private sector” were a single donor, it would be the 5th largest DAC donor
• In the US: PDA = $39 billion vs. US ODA = $30 billion (2011)
• Net ODA = ~$134 billion, but is roughly equivalent to PDA in terms of money available for use by recipients (“programmable aid”)
Origins
• NGOs historically relied on support from individual gift giving, personal donations, and child sponsorship
• Between 1980s and 2000s, NGO income came increasingly from official governmental donors using tax-based funding
• Since 2000s, diversification in funding sources
Varieties of PDA
New Funding Sources
• Private philanthropies (foundations, philanthropic ventures)• Income-generating activities (e.g. Oxfam Trading, BRAC Bank),
commissions and contracts (e.g. Technoserve), Social enterprises (e.g. the Kenyan-based Sidai)
• Community initiatives (community development foundations)• Privately administered trusts (Comic Relief, UK Big Lottery)• Web-based personal giving (Razoo, GivingWhatWeCan,
GivingWell)• Individual giving: of all the funding raised by US NGOs
– ¾ comes from individual contributions– 65% from households with incomes < $200,000/year
The New Aid Architecture
Official vs. Private FlowsConstant (2005) US$, billions
ODA vs. PDA
0
20000
40000
60000
80000
100000
120000
140000
160000
Cons
tant
USD
(201
3, b
illio
ns)
ODA
Private Grants
ODA vs. PDA
0
20000
40000
60000
80000
100000
120000
140000
160000
Cons
tant
USD
(201
3, b
illio
ns)
ODA
Private Grants*
Total PDA**
** Center for Global Prosperity* OECD – CRS *** Development Initiatives
$45b***
ODA vs. PDA
0
20000
40000
60000
80000
100000
120000
140000
160000
Cons
tant
USD
(201
3, b
illio
ns)
ODA
Private Grants
CPA*
* OECD – CRS
US Financial Flows Compared
2004 2005 2006 2007 2008 2009 2010 20110
50
100
150
Cons
tant
USD
(201
3, b
illio
ns)
ODA
PDA
Remittances
Private Capital
The “California” Consensus
Foundations
• 1980 – 2010: number of active foundations in the US grew from 20,000 to 80,000
• The number of “public benefit” foundations in 13 EU states increased from 45,000 to 95,000
• Proportion of resources contributed to international causes is still small but is growing rapidly (+70% between 2002 and 2008)
• Foundations increasingly establishing their own delivery mechanisms outside of NGO channels
The “California” Consensus (cont’d)
Philanthropy 1.0
• Small scale• Fragmentary• Crisis relief• Program-based grant
making• Largely non-profit based• Channeled through NGO• Risk averse
Philanthropy 2.0
• Scalable?• Coordinated?• “Programmable”?• Flexible architecture• Mixes non-profit + for-profit
approaches• Own delivery mechanisms• Innovative
Private Aid: Expectations
• Able to bypass public sectors in recipient countries less leakage via corruption, asset diversion, etc.
• Better able to absorb frontline knowledge• Smaller overhead and administrative costs
more “untied”• Shielded from geo-politics of aid and lending
better able to allocate aid on the basis of need
EvidenceArgument EvidenceLess corrupt NoLocal knowledge Yes. Int’l NGOs have intensely local programs run
by local staffLower overhead Yes. Estimates are ~6%, compared to:
8% (average DAC bilateral donor)18% (average multilateral)46% (UN agency)
Flexibility Yes. Humanitarian crises received PDA at a faster rate than ODA; PDA more durable (more responsive to natural disasters than conflicts)
Need-based Mixed
AllocationFactor ODA PDAPoverty/Need Yes Depends on
funding source
Country institutions Yes NoCountry strategic alliances Yes NoSovereign risk Moderate NoProject/Sector risk Moderate ModerateHumanitarian need Moderate Yes“Newsworthiness” No YesRecipient-donor social linkages Bilaterals,
weaklyYes
What Does Show Us?
DON’T CARE ABOUT:
• Sovereign or project risk• ODA performance-based allocations• Stock market in home country• Geo-strategic relationships with
home country• State fragility• News-worthiness
DO CARE ABOUT:
• Gender• Project size (diminishing)• Natural disasters• Immigrant populations
(especially refugee populations)• Asia/Latin America
• $100 million in microloans per year• Loans without interest (blend of investments and grants)• 99% of funds are re-lent (or left idle)
GlobalGiving Portal (old)
22
GlobalGiving Portal (new)
Challenges
• Coordination• Concentration of resources• Lack of data on volumes, allocations, impact• Accountability is uneven• Things PDA cannot do: e.g., infrastructure, legal &
policy reforms• Imbalance between NGOs from rich vs. poor countries• Incentives to promote “good images” rather than
achieve results?
Advocacy Incentives?
ODA vs. PDA?(with apologies to Bill Easterly)
PDA and the Post-2015 Agenda
• PDA community needs to develop its own agreements on effectiveness, commitments, targets, indicators
• Global initiative to gather, analyze, and map private aid flows and their impact
• Formal linkages between PDA & ODA institutions– “Observer” seats from PDA donors & civil society at the DAC)– Include major PDA donors in donor-steering committees– Create broader ODA-PDA groups based on technical expertise– Regular consultations with civil society in recipient countries